PRESIDENT Rodrigo Duterte has taken a certain pride in not being influenced by the opinions of foreign officials or media, but on Friday, two important analysts – Moody’s Investors Service and the Nomura Group – issued some dire-sounding warnings that he would be well advised to heed.
The two firms assessed the potential implications for Asian countries of the possible outcomes of the US election to be held in November, in which either the Democratic candidate Hillary Clinton or the Republican Donald Trump will be elected President. Moody’s and Nomura were circumspect in their comments to avoid favoring one or the other, but clearly raised higher alarm in case a Trump presidency is put in place, predicting that in general, his anti-immigration, nationalist stance would harm the emerging economies from this part of the world.
It is important to realize, however, that it is not a black-and-white difference. A Clinton presidency may also have negative implications, although they are much clearer in the case Trump is elected. Although Clinton contrasts Trump in her views on immigration, she has differed with President Obama on things like the Trans-Pacific Partnership (TPP) trade pact, which the Philippines hopes to be invited to join sometime in the near future, but whose future is now in doubt no matter who wins the US election.
As some American political analysts pointed out recently, the unexpected popularity of Trump, even if he loses, may mean that Clinton will have to adopt some more populist ideas to appeal, not to voters, but the members of the US Congress whom voters who share Trump’s views may elect. And that is likely to mean some tightening of immigration policies, and discouraging companies from the practice of offshoring, two things that have a direct and significant impact on the Philippines.
Moody’s pointed out that remittances from Filipino workers in the US account for about 3.3 percent of our gross domestic product, or GDP, which is the widely used measurement of a country’s economic performance. Nomura added that the US hosts about 34.5 percent of the total overseas Filipino population, and is responsible for about 31 percent of all remittances. A tightening of immigration, or moves to limit or discourage the hiring of foreign workers by businesses in the US, is bound to lead to a decline in those remittances.
Likewise, any trend that reduces US companies’ appetite for offshore business locations will hurt the Philippine economy, perhaps even more so than a reduction in remittances, because an expected rise in business process outsourcing (BPO) revenues within the next few years has been factored in to the country’s economic performance in the medium term.
Both Moody’s and Nomura pointed out that the Philippines has a strong economic foundation, including a healthy current account and ample foreign reserves, and those should help to cushion any shocks from the change in US policy – whatever it may be – after the election. That much is comforting, but those assets are finite; the real message to the Duterte government is that reliance on the US for a sizable contribution to the economy may very soon be a very bad idea, and that domestic development should be a priority.
This is a message that the Duterte administration should listen to; while his ambition to establish an independent course for the country is praiseworthy in some ways, he should not entirely ignore what others have to say; sometimes, as in the case of Moody’s and Nomura’s assessments, they are actually trying to help.